The traditional project delivery
process has no stage specifically labeled
funding, yet funding challenges affect
each stage of the process-
from right-of-way
(ROW) that can't be purchased due
to unavailable funds to a project that completes
the environmental process only to
have policymakers reject the chosen source
of funding.
Funding challenges affect project delivery
for many reasons:

Legacy of the Traditional Process: Funding in the
Back Office (on the Back End)

Explicitly or not, the traditional project delivery
process tended to assume that Federal-
aid and State funds, based on gas taxes,
will be sufficient to cover the costs of projects
identified on state plans. Under the old
paradigm, projects would move through
preconstruction development stages (planning,
ROW, design, and National Environmental
Policy Act), after which a State
Department of Transportation budget official
would match the project to an appropriate
category of Federal-aid or state funds.
Because the category selected would not affect
the project's design, this back office" or
largely administrative function did not require
the involvement of the public, potential
private concessionaires, or the capital
markets. By contrast, new revenue, finance,
and procurement options require project
sponsors to engage the public earlier.

Lack of Public Involvement Impedes Revenue,
Finance, and Procurement Decisions

Although the assignment of Federal-aid
funding categories is rarely a topic of public
discussion, addressing the resource constraints
that confront major projects requires
significant public scrutiny of revenue, finance, and procurement options. Public
involvement is critical for public acceptance.
Options such as tolling, bonding, Transportation
Infrastructure Finance and Innovation
Act borrowing, or public-private
partnerships may require State- and local enabling
legislation or ballot measures. If
these options are not considered early in
the project development process, significant
work can be required to bring the public
in later.

Design Must Follow Innovations

Alternative revenue, finance, and procurement
options may have implications for the
project design. For example, if tolling is
considered for a bridge, the design might
be different in order to reduce diversion,
enhance enforcement capability, and/or
provide space for tolling gantries. Similarly,
a value capture option (e.g., using revenues
from air rights located above a new tunnel)
can have design implications. If these options
are not considered up front, it can be
expensive and difficult to re-do the work.

Non-Parallel Process Prolongs Environmental
and Other Disputes

The traditional project delivery process
does not ensure that such revenue, finance,
and procurement decisions occur in parallel
with the planning, design, and environmental
processes. Therefore, the consideration
of alternative project delivery options
after the issuance of a Record of Decision
(ROD ) may trigger a reopening of the environmental
process. For example, a State
may have to issue a Supplemental Environmental
Impact Statement if tolling is added
to a project after the ROD has already been
approved. This new process may reopen the
environmental or alignment conflicts, causing
further delay and preventing the project
from being delivered.

Fiscal Constraint at the Program Level, but Less
Planning at the Project Level

Federal planning regulations and guidance
specify that all projects that receive Federal-
aid assistance must appear on a Statewide
Transportation Improvement Program
(STIP). The STIP must be "fiscally
constrained," that is, the State must demonstrate
that it has sufficient funds to construct
the projects during the term of the
STIP.

Yet for projects that have not yet been
added to the STIP, past experience with
the Federal-aid program often provides
State and local transportation agencies significant
incentive to delay consideration
of alternative funding options. For example,
congressional earmarking may reward
project sponsors on the basis of their demonstrated
need. That may in turn give an
advantage to projects with inadequately
developed funding plans, versus those that
show initiative or local support in getting
dedicated funding or identifying innovative
revenue, finance, and procurement
approaches. Similarly, few States have developed
processes to encourage local governments
to be proactive in identifying innovative
solutions, rather than to wait for
their sub-allocations.

Conclusion: Addressing Funding Challenges Will
Help Program Delivery

Certainly funding shortages are not the
only challenges to overcome in the program
delivery process. However, because
funding-related challenges are not clearly
identified as such, they are more difficult
to resolve. Highlighting the points in the
process where funding causes delay or prevents
project development may help States
gain public support to obtain needed funding
or to consider alternative project delivery
options. The traditional project delivery
process masks the funding issue and prevents
the public from both recognizing and
addressing a key challenge to project delivery.

FHWA's Office of Innovative Program Delivery
(IPD) works to identify issues and improve project
delivery by integrating revenue, finance, and
procurement options into the delivery process.
In addition, IPD is:

Working with the planning community to
bring revenue considerations into the process

Commissioning white papers by thought
leaders

Through our Opportunity State Initiative,
working with select States as they endeavor to
incorporate innovative financing and revenue
strategies into their program delivery process.
IPD will share lessons learned at regional workshops.